B2.01.07: Rational Producer Behaviour

Question 1

What 3 arguments does traditional economics (assumptions of the rational consumer) give?

Answer 1

• Consumers will gather all the info
• Consumers will weigh up all the info
• Consumers will take the time and make a utility maximising decision

Question 2

What is behaviour economics?

Answer 2

disputes the idea that consumers are always ration and will always maximise utility. Arguing that emotional societal and psychological factors can influence decision making.

Question 3

2 arguments for behaviour economics?

Answer 3

• Rationality might be bounded - Consumers may not have time, consumers may find it difficult to evaluate all the choices, consumers may have imperfect info
• Self-control might be bounded - Consumers knows exactly what to do to maximise utility but they are bounded by self-control